By Donna Rosato
July 16, 2015

Q: My employer offers a 401(k) plan with a match. But all the funds in the plan have fees greater than 1.5%. That seems expensive. What should I do? – Jayesh Narwaney, Colorado

A: “Costs are one of the top things you should look at in a 401(k) plan,” says Mike Tedone, CPA and partner at Connecticut Wealth Management in Farmington, Conn. If your plan charges, say, an extra 1% in fees, that could reduce your retirement savings by 17% over a couple of decades.

Unfortunately, those fees are something that many workers overlook—and it’s easy to understand why. Plan costs aren’t easy to decipher, even though federal rules went into effect two years ago requiring better disclosure of 401(k) fees and investments. A National Association of Retirement Plan Participants study found that 58% of working Americans don’t realize they are even paying fees on their workplace retirement savings plans. And among those who were aware of costs, one out of four weren’t sure how much they were paying.

Here’s what you should know: Most workers pay two kinds of fees in 401(k)s. One category is the plan administration fees, which cover the paperwork and day-to-day operations. These costs might range from a few dollars to nearly $60 year, though some employers will foot this bill.

The other cost, and the biggest one, is the investment fees, which are paid to the managers of your funds. Investments fees typically aren’t covered by the employer—they are pooled together and deducted from your plan assets. You’ll see it listed in plan documents as the fund’s expense ratio.

How much does the average worker pay for a 401(k) plan? The costs, all-in, vary by plan size, but they generally range from 0.5% of assets for large company plans to 1.5% for smaller plans, says Tedone. Large plans tend to have lower fees than small plans because they can take advantage of economies of scale. So if the funds in your plan have investment fees of 1.5%—and that doesn’t include the administrative costs—your 401(k) expenses are indeed high.

To get a more specific idea of how your fees compare to other plans, you can check out BrightScope, which rates more than 50,000 401(k)s.

Unfortunately, there’s not a lot you can do to improve your 401(k) on your own. You could ask your employer to add lower-cost choices, but that isn’t likely to happen anytime soon.

That doesn’t mean you should give up on your plan, though. If your employer offers matching contributions, you should save at least enough to get the match. “That’s free money, and you don’t want to miss out on that,” says Tedone. Also, if you’re married and your spouse has a better 401(k) plan, be sure to max that out.

Meanwhile, you do have other options. First, check to see if your company offers a self-directed brokerage window, which allows you to choose your own funds. If you’re comfortable selecting your own investments, you can build a mix of lower-cost index funds or ETFs. Or you can simply opt for an inexpensive target-date fund.

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If your 401(k) doesn’t offer a brokerage window, consider saving outside your plan in a traditional or Roth IRA, which will give you the freedom to pick the investments. You do face lower contribution limits in IRAs, though—up to $5,500 a year for a traditional or a Roth IRA (those 50 and older can save an additional $1,000) vs. $18,000 in a 401(k). And you must meet certain income limits to qualify for tax breaks.

At the end of day, though, it’s hard to beat your 401(k) for building retirement savings, despite the high costs. The plan allows you to put away the most money on a tax-sheltered basis. What’s more, it’s the easiest way to save, since your contributions are automatically taken out of your paycheck. “When you take all that into account, your plan isn’t as bad as you think,” says Tedone. And at some point, when you change jobs, you’ll be able to move your savings to a better 401(k) or IRA.

Read next: Here’s How Much Cash You Need in Retirement

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